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By: Stuart Ritchie

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August 30th, 2017

Why YOU may be able to retire much sooner than you thought

Financial Planning

[Estimated reading time: 3 minutes, 50 seconds - read while you are in the queue at the supermarket]

I’m excited…

Because today – I get to debunk a retirement myth.

It’s going to free up your thinking…

Retirement Sign BG.png

And maybe free you up to retire much sooner than you thought.

The great retirement myth

1. You have to save to accumulate a nest egg sufficiently large to replace your employment income;

2. That sum has to sustain a stable standard of living throughout your entire retirement;

3. If you haven’t saved enough to maintain your current lifestyle in retirement for the next few decades, then you can’t retire!

Not true my friend!  Not true…

Why?

Because there’s a growing body of evidence to show spending levels decrease significantly as we progress through retirement…

As a result, the conventional thinking laid out above is no longer the accepted truth among forward thinking financial practitioners.

As this article will show, this may mean you can bring forward the day when you get to do whatever you like with the rest of your life!

Having your ideal retirement lifestyle by saving in the right way

From go-go to no-go: how spending reduces with age

The traditionally held view of retirement spending is that you will generate enough income to replace your earnings - and through so doing, maintain your existing standard of living when you stop working.

But…from the taxes you currently pay on your salary, to the intensive investment approach you’re committed to in order to build up a pension…there’s more than a handful of expenses (like commuting to work) that won’t be relevant to you when you retire.

Therefore, already you can see that instead of replacing 100% of your salary – you may only need to replace 70% - 80% of pre-retirement income to enjoy your current lifestyle in retirement.

The financial savings don’t stop there, however…

Whatever your actual expenses will be in retirement, conventional thinking is that you need to support them at a continuing rate.  Indefinitely.

But that’s not an accurate reflection of retirement spending patterns.

Why you don’t need as much money as you thought

Retirees alter and reduce their spending behaviour over time.

Author of The Prosperous Retirement, Michael Stein, identified three phases of retirement in terms of spending…

1. The Go-Go years – this is the active first decade or two of retirement, and largely a continuation of the pre-retirement lifestyle;

2. The Slow-Go years – this is a less active second - third decade of retirement, and as health and energy-levels begin to decline, discretionary spending slows up;

3. The No-Go years – this is the final decade of retirement in which most discretionary lifestyle spending stops altogether.)

Phases of Retirement.pngThe Three Phases of Retirement -  Michael Stein

In retirement, our spending will slow down year by year…

What’s more, the underlying composition of our retirement spending will begin to shift as well, as we move through these age bands.

Spending on housing and entertainment activities falls significantly in the later years, for example.

But, one caveat before you get too excited however, and think that by the time you hit your nineties you won’t need more than a few pounds a week to feed yourself…

…it’s critical to note that some expenses may well rise...like healthcare and home help for example.

Still, however, all the evidence proves that discretionary spending just keeps on falling away – and it falls by more than health and care expenses rise.

Ultimately, this means there is an overall and steadily consistent decrease in spending as we proceed through the age bands and our retirement…

Which means…

You may need far less money to retire on than you originally thought, and than any financial adviser previously led you to believe.

Thus – perhaps you’re much closer to achieving your retirement income requirements already – and you can retire sooner.

Tell me when I can retire Stuart!

The foregoing is all well and good – but I know you want to know:

1. When can I retire…

2. Am I on track financially

3. How can I make my retirement savings last…no matter what…

Growing your retirement fund

 

So, I’ve put a number of resources to help your further in the box below..AND…I want to make you an offer.

It’s free to you today – although it would normally cost £500…

The offer:

My team and I will take a look at your current financial position, and give you answers to the above three questions.  The factual information and professional advice will be delivered without obligation – and at no cost.

Click here to fill in the brief form on our Talk to us page - and we’ll call you and get the ball rolling

After all – if you can retire much sooner than you planned…you need to know as soon as possible!

Resources:

A step by step guide to never running out of money in retirement

Part 1

Part 2

Part 3

 

QROPS, SIPPs and pension transfers:

The different options

Your choices

10 critical pension transfer facts

 

Pension and retirement guides

5 key resources in 1

Close to retirement?

Pension transfer pitfalls - and how to avoid the

About Stuart Ritchie

Stuart Ritchie is a Chartered Financial Planner, Chartered Fellow, and Pension Transfer Specialist.

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